TMI Blog2016 (12) TMI 1072X X X X Extracts X X X X X X X X Extracts X X X X ..... venue. -Decided in favour of assessee - I.T.A. No. 277/Vizag/2012 - - - Dated:- 25-11-2016 - Shri V. Durga Rao, Judicial Member And Shri G. Manjunatha, Accountant Member Appellant by : Shri G.V.N. Hari, AR Respondent by : Shri M. Bhupal Reddy, DR ORDER Per G. Manjunatha, Accountant Member This appeal filed by the assessee is directed against order of the CIT, Rajahmundry u/s 263 of the Income Tax Act, 1961 (hereinafter called as 'the Act') for the assessment year 2007-08. 2. The brief facts of the case are that the assessee is a Private Limited company engaged in the business of trading in Poultry Eggs, filed its return of income for the assessment year 2007-08 on 31.7.2007 declaring total income of ₹ 41,85,542/-. The case has been selected for scrutiny under CASS and accordingly, notice u/s 143(2) 142(1) of the Act were issued. In response to notices, the authorized representative of the assessee appeared from time to time and furnished books of accounts and other information called for. The assessment was completed u/s 143(3) of the Act on 9.12.2009 determining total income of ₹ 47,51,057/- by making additions of ₹ 5,65,570 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.2009 is not erroneous in so far as it is prejudicial to the interest of the revenue, as the A.O. has examined all the issues pointed out in the show cause notice at the time of completion of assessment. The assessee further submitted that it has furnished books of accounts along with bills and vouchers and other relevant information at the time of assessment proceedings, in response to a show cause notice issued by the assessing officer on various occasions. The A.O. has issued various show cause notices and called for specific details about the expenditure debited to P L account, confirmation letter from sundry creditors and deposit from farmers and also examined the issue of net profit admitted by the assessee. It was further submitted that the A.O. has sought each and every details in respect of expenditures and also examined the reasonableness of expenditure claimed under the head packing and forwarding. The assessee has furnished bills and vouchers in support of packing materials and explained the necessity of purchasing the packing materials. It was further submitted that it is in the business of trading in poultry eggs from farmers and the farmers would supply eggs withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue pointed out in the show cause notice with reference to supporting evidences. The CIT, further, observed that the A.O. has completed assessment by making adhoc disallowance of expenditure without examining the specific issues referred to in the show cause notice, such as packing material expenditure, sundry creditors, advance from farmers, investments in sister concern and low net profit declared by the assessee. The CIT further observed that the assessee has failed to explain the necessity and reasonableness of incurring such a magnitude of expenditure, however, the A.O. without examining the applicability of provisions of section 40A(2)(b) of the Act, simply accepted the expenditure claimed by the assessee. The CIT, further, observed that on perusal of the assessment records, it was noticed that there is no iota of evidence in the records to show that the A.O. has called for confirmation letter from sundry creditors and from farmers to examine the sundry creditors and deposit from farmers claimed by the assessee. The A.O. also failed to examine the net profit declared by the assessee, even though the assessee has declared a meager 0.39% net profit on a huge turnover of more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained the reasons for admitting low net profit. The A.O. after considering the details furnished by the assessee has chosen to make certain adhoc disallowance for want of proper bills and vouchers in respect of certain expenditure. From this, it is abundantly clear that the A.O. has examined each and every item before completion of assessment, therefore, the CIT was not correct in holding that the A.O. has not conducted proper enquiry before completion of assessment. The Ld. A.R. further submitted that the CIT cannot take up revision on the issues which were already examined by the A.O. by holding that the issues were not examined by the A.O. to the satisfaction of the CIT. The assessee has submitted all the information before the A.O. and the A.O. has verified the issues pointed out by the CIT and applied his mind before completion of assessment. Therefore, the CIT cannot come to the conclusion that there is a lack of enquiry on the part of the A.O. in examining the issues pointed out by the CIT. The D.R. on the other hand, strongly supported order of the CIT(A). 9. We have heard both the parties, perused the materials available on record and gone through the orders of the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. It also explained the reasons for low net profit for the period. The A.O. after considering the details furnished by the assessee completed assessment, which cannot be termed as erroneous in so far as it is prejudicial to the interest of the revenue. 11. Having heard both the parties and considered materials on record, we find force in the arguments of the assessee for the reason that the A.O. has examined the issues pointed out by the CIT, in the show cause notice at the time of completion of assessment. We further observed that the A.O. has issued show cause notice, wherein he had specifically called for details about expenditure and other issues pointed out by the CIT. The assessee has furnished bills and vouchers in respect of expenditure debited in the profit loss account and also furnished confirmation letter from sundry creditors wherever the creditors balance exceeds ₹ 1 lakh. The assessee also furnished details of deposit from farmers and explained that it is the common practice in this line of business that the traders will keep 2 to 3 days sales as deposit from farmers and to this effect furnished necessary details before the A.O. Therefore, we ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is erroneous may be prejudicial to the interest of the revenue or vice versa. In some cases the order passed by the A.O. may be erroneous, but it may not be prejudicial to the interest of the revenue or vice versa. Unless the order passed by the A.O. is erroneous and also prejudicial to the interest of the revenue, the CIT cannot assume jurisdiction to revise the assessment order, this is because the twin conditions i.e. the order is erroneous and the same is prejudicial to the interest of the revenue are co-exist. In the present case on hand, on perusal of the details available on record, we find that the A.O. has conducted detailed enquiry and also examined all the issues pointed out by the CIT in the show cause notice. The assessee has explained each and every issues with necessary evidences. Therefore, we are of the view that, the CIT cannot assume jurisdiction to revise the assessment order, once assessee explained that it had filed all the details before the A.O. on the issues on which CIT wants further verification. It is the general presumption of law that the A.O. has considered all the details before completion of assessment, once the assessee has filed details called for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 15. The assessee relied upon the decision of Hon ble High Court of Delhi in the case of CIT Vs. Sunbeam Auto Limited (2011) 332 ITR 167. The Hon ble Delhi High Court, under similar circumstances held that once the A.O. has examined a particular issue, which is the subject matter of revision u/s 263 of the Act, the CIT cannot assume jurisdiction u/s 263 of the Act by holding that the order passed by the A.O. is lack of enquiry and also the A.O. has not applied his mind before completion of assessment. The relevant portion of the order is reproduced hereunder: The submission of the counsel for the Revenue was that while passing the assessment order, the AD did not consider the aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the AD had not applied his mind on the issue. The AD in the assessing order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a manufacturer of car parts. In the manufacturing process, dyes are fitted in machines by which the car parts are manufactured. These dyes are thus the components of the machines. These dyes need constant replacement, as their life is not more than a year. The assessee had also explained that since these parts are manufactured for the automobile industry, which have to work on complete accuracy at high speed for a longer period, replacement of these parts at short intervals becomes imperative to retain accuracy. Because of these reasons, these tools and dyes have a very short span of life and it could produce maximum one lakh permissible shorts. Thereafter, they have to be replaced. With the replacement of such tools and dyes, which are the components of a machine, no new asset comes into existence, nor is there benefit of enduring nature. It does not even enhance the life of existing machine of which these tools and dyes are only parts. No production capacity of the existing machines is increased either. It is clear that view taken by the AO was one of the possible views and therefore, the assessment order passed by the AO could not be held to be prejudicial to the Revenue. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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